Russian companies ‘de-dollarize’ and switch to yuan, other Asian currencies

Russia will start settling more contracts in Asian currencies, especially the yuan, in order to lessen its dependence on the dollar market, and because of Western-led sanctions that could freeze funds at any moment.

“Over the last few weeks there has been a significant
interest in the market from large Russian corporations to start
using various products in renminbi and other Asian currencies,
and to set up accounts in Asian locations,” Pavel Teplukhin,
head of Deutsche Bank in Russia, told the Financial Times, which was published in an
article on Sunday.

Diversifying trade accounts from dollars to the Chinese yuan and
other Asian currencies such as the Hong Kong dollar and Singapore
dollar has been a part of Russia’s pivot towards Asian as tension
with Europe and the US remain strained over Russia’s action in
Ukraine.

Since Crimea voted to rejoin Russia, the US government has
imposed Cold War era sanctions, which have hurt the Russian
economy and have slowed lending and investment activity.

VTB, Russia’s second largest bank, intends to increase the amount
of non-dollar settlements, according to the
bank’s president Andrey Kostin.

In May, Russia’s biggest gas producer, Gazprom, announced it
wants to start trading shares in Singapore, obtaining a listing
as early as July, the company said. Just before that Russia’s
state-owned gas giant inked a $400 billion gas deal with China.

“Given the amount of bilateral trade volume with China, of
course, we are working on the expansion of settlement in rubles
and yuan,” Kostin said at a meeting with Russian President
Vladimir Putin, adding this is a goal the bank has been moving
towards since May.

A new payment plan

Russia's main tasks are expanding currency operations and
creating Russia’s own forthcoming national payment system.

The Central Bank of Russia is working on creating a national
payment system, which both China and Japan have already
established, and is expected to be up and running within four
months.

Alexander Dyukov, the CEO of Gazprom Neft, the oil division of
Gazprom, has been very vocal about ditching the dollar over escalating pressure from
the West.

"This shows that in principle there is nothing impossible -
you can switch from dollar to euro and from euro, in principle,
to rubles," Vedomosti quotes Mr. Dyukov.

He has also said the company has discussed with customers the
possibility of shifting contracts out of dollars, while Norilsk
Nickel told the FT that it was discussing denominating long-term
contracts with Chinese consumers in renminbi.

As of now, Russia is not preparing any countermeasures against
the West, Putin’s chief advisor to the EU, Andrey Belousov has
said.

“As long as Russia is not subject to systemic sanctions,
which could bring an artificial limit to our economy’s access to
dollars . . . then I don’t think Russia will take any steps in
order to bring about artificial de-dollarization,” the FT
quoted Belousov as saying.

Another swift move Russia has made towards Asia is the establishment of a joint rating agency with
China, to replace more "biased" agencies like Fitch, Moody’s, and
Standard & Poor’s.